Yahoo Earnings: What to Expect When You're Not Expecting (Much)

Here’s a bright spot in Yahoo’s third-quarter earnings announcement later today: Sources told BoomTown that the company will not announce a specific number of layoffs tomorrow, although it will give an overall percentage of employees and costs to be cut.

In other words, you get to practice your long division and multiplication skills! Fun!

Well, no wonder, given what is likely to be on the agenda: a very bad economy, a vicious hit to display advertising, a sagging stock, layoffs whacking the already dispirited employee base, a lugubriously-paced deal to possibly merge with AOL, no Microsoft interest in bidding $31 a share for Yahoo again until hell freezes over and its regulatory-troubled search ad outsourcing deal with Google.

And, most of all, whither the management tenure of Yahoo’s Yang.

BoomTown is officially bummed.

In any case, here are the particulars to watch out for:

The Numbers: A consensus of analysts has expected Yahoo (YHOO) to have $1.37 billion in net revenue and income of nine cents per share for the three-month period, although some are predicting that Yahoo will miss those estimates by a penny.

More depressing, due to the very poor economic outlook and Yahoo’s reliance on display advertising over more recession-proof search ads, most expect Yahoo execs to give very weak guidance for the upcoming fourth quarter and perhaps beyond.

How low can it go? Think lower.

The Stock: Could Yahoo shares get hit any harder? Now hovering in the $12 range, the stock is down 45 percent for the year.

This gives one of the Internet’s most trafficked sites a market value of only about $18 billion.

And, yes, its shares could also drop even further, especially if Yahoo’s story is still sadder today and new ideas from its execs to fix things are not well received.

The Layoffs: As I said, more staff will be cut (and I expect other key and very disgusted employees to also soon be heading out the door on their own two feet too), numbering about 1,500. Many cuts will come in departments like HR and Finance.

But, sources said, these sorry souls have not been officially selected yet and true departures will not start immediately.

While most think Yahoo has long needed to tighten up its troop count, let’s be clear: You can’t cut your way to growth and the innovation needed to remake Yahoo.

The AOL Deal: What is truly striking is how long it is taking for this deal to be consummated. Oh, Yahoo and AOL are still jabbering away, sources said, which makes this dealmaking seems longer than this endless presidential election.

Would it be great if they announced it today? Yes, it would be, given both Yahoo and AOL owner Time Warner (TWX) desperately need a new story to spin to get the focus off their sorry current plots.

In fact, if these two were Warner Bros. television productions, Yahoo and AOL would be “Cold Case” and “Without a Trace.” Except, you know, those two shows are actual hits.

As I have written many times, Yahoo should only do the deal if it can get the much-faster-dwindling AOL on the cheap. And AOL? It should take cheap and be thankful for it.

A Microsoft Rebid: As much as journalists continue to misconstrue Microsoft CEO Steve Ballmer’s remarks last week about still being interested in a merger with Yahoo (he was speaking specifically of a search deal), Microsoft does not seem to be rushing back to the table.

I think Microsoft (MSFT) would if an AOL-Yahoo combination is ever struck, trying for that elusive search deal, of course.

But otherwise, I think Ballmer is content to let Yahoo swing in the wind a little longer. After all, his feelings were hurt by Yang’s rejection!

Which would be a first for the black-hatted Microsoft–sort of like brain-chewing Sylar turning out to be the good guy on this very odd third season of “Heroes.”

Then again, mutating the words of Woody Allen: The heart doesn’t want what it doesn’t want.

The Most Sacred Cow of All: Last year in his first quarterly earnings call as CEO, in a phrase he surely regrets uttering, Yang said he would undertake a 100-day hard look at Yahoo and that there were “no sacred cows.”

As it turned out, there were a lot of them, none of which were touched, most especially Yang himself.

Now, I like Yang personally a lot. More than a lot–he is a decent and thoughtful person, a true Web visionary and has a deeply-held heartfelt belief that he has the skills Yahoo needs to make it through this current period of crisis.

It is a crisis the company has seen before–things looked dicey back in the 2000 to 2002 period too, and Yang and others powered through to eventually pull Yahoo forward.

But that was then and this is now. The problems Yahoo faces are of a quantum level of difficulty, and Yang needs to clearly articulate once and for all why his investors and employees should put up with any more of his leadership.

In doing so, he can’t blame the economy or make excuses related to Microsoft’s takeover machinations or claim it is super-hard to turn around a company.

He has to give investors, employees, Wall Street, the media and consumers a better reason to stick with him than his heart bleeds purpler than anyone.

And that means a clear, bold, decisive and stone-cold plan to get Yahoo to a place of success and innovation it surely could be.

With its amazing products, huge traffic and still-great brand, anyone can see Yahoo can still be made into a really amazing company again.

And, if Yang can’t do that, he has to have to guts to find someone who can.

When AllThingsD began, we told readers we were aiming to present a fusion of new-media timeliness and energy with old-media standards for quality and ethics. And we hope you agree that we’ve done that.

— Kara Swisher and Walt Mossberg, in their farewell D post

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